Payroll
2018 Review of W2 and 1099 Preparation Systems
In 2005, approximately 10 percent of workers were considered freelancers or contractors. That number rose to almost 16 percent in 2015 and will likely continue to rise in the coming years, as businesses find that they can reduce salary and associated ...
Apr. 18, 2018
In 2005, approximately 10 percent of workers were considered freelancers or contractors. That number rose to almost 16 percent in 2015 and will likely continue to rise in the coming years, as businesses find that they can reduce salary and associated expenses by using freelancers and contractors instead.
One of the turning points in the U.S. was the recession of 2008. As more U.S. workers found themselves without a job, many turned to freelancing, and continued to do so, even as the economy gradually improved.
In 2018, contractors are being utilized in the workforce more than ever before, with both business owners and freelancers/contractors experiencing the benefits of this changed workforce, with businesses able to get a handle on overhead and payroll costs, while freelance workers appreciate the flexible schedule and ability to have more control over their work environment.
What this means for business owners is an increase in the number of 1099s that will need to be processed. While processing W-2s for employees is a straightforward process, businesses need to understand that processing 1099’s begins when a contractor is hired, not at year end, when forms are required to be processed and mailed/emailed out to those same contractors.
Even with the increase in freelance workers and contractors, many businesses find themselves struggling at year end to gather the information they need to process 1099s. January 1st is not the time to search out TINs and social security numbers. That information should be obtained when the contractor starts work. There’s no reason why a contractor should be working at a business without a valid TIN or social security number on file. Taking five minutes to obtain this information would go a long way towards eliminating the year-end chaos that typically accompanies 1099 processing. And since non-compliance can be costly, ensuring that 1099’s are processed both timely and accurately is more important than ever before.
The other thing that can reduce or eliminate the chaos is using a 1099 program that is designed to eliminate some of the year-end drama that can occur when processing 1099’s. While there’s some terrific software available that can make the job a lot easier, many small businesses are simply choosing to outsource this task to their accountants. So, whether you’re a small business owner looking for a solid 1099 software program, or an accountant looking for the same, there are many programs to choose from – some part of a larger accounting program, others used as an add-on solution.
When looking to purchase a 1099 program, it’s important to make sure that the product has been updated for the appropriate tax year. Most of the applications update their products in late fall, with the updated version available in December. Many programs also over a demo, so users can try out the application prior to purchasing.
We looked at ten products in this latest review. Many of the products are part of a larger suite, and work best when in conjunction with other modules in the suite, while others are designed to work as stand-alone products. Most of the products offer electronic filing options and offer TIN verification in order to ensure accuracy. Both desktop and online products were reviewed, so users can choose the access option best suited for their needs.
The products reviewed include (view a comparison chart):
- AccountantsWorld After-the-Fact Payroll
- American Riviera Magtax
- AMS Software – 1099-Etc
- Wolters Kluwer – W2 and 1099 Payroll Compliance
- EG Systems
- Greatland Yearli
- Spokane Computer – MAG-FILER
- Tenenz EagleView
- Tenenz LaserLink
- Track 1099
The accompanying chart identifies the common features found in each of the products, making it easy to see if a product offers the features you’re looking for. Some of the features in the chart include:
- Online/mobile accessibility
- Processes both W-2s and 1099s TIN Verification available
- Electronic filing available
- Prints on blank paper
- Integration with vendor module
- Integration with other applications
Contract employees are not going away. If you have a 1099 system that works well, that’s terrific. But as the number of contractors rise, processing becomes more important, and the tools needed more comprehensive.
If you’re looking for a 1099 program, one of the best places to start looking is in this issue.